Supply Chain Management of BMW Cars

Executive Summary

BMW is an automobile manufacturer whose headquarters are located in Germany. It has been in operation since 1917. In 2010, the company produced 1,481,253 vehicles. There was an increase compared to the previous year where the production level stood at 1.3 million. The organization’s business model is more of consumer orientation. This means that the organization usually manufactures cars that are being demanded in the market. Through its supply chain management, BMW tends to choose suppliers that have already built a name for themselves. These are those companies with great recognition and reputation. It becomes easier to build trust with end consumers by using such suppliers. The production process on its part involves several chronological processes that must be followed in all the manufacturing plants. There are shops developed to cater for this process. A similar approach is used in all the plants for standardization purposes. The company has instituted a diverse distribution channel. Through its channels the company can sell directly to consumers. It can also sell to consumers through retailers or wholesalers. Having diverse distribution channels has enabled to reduce the bargaining power of distributors.BMW views end consumers as vital elements to the company. They are the ultimate reason for the organization being in business. For this reason the company tries to bring efficiency to their side by producing what they demand. Efficiency is also enhanced through the distribution channels that the company utilizes. The company has been making decisions that are favoring the success of the organization. However, some of the decisions need to be revised for future prosperity. Aspects of e-commerce are also vivid in the organization’s activities.  
  
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Table of Contents

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1.0  Introduction…………………………………………………………………………………4

2.0  Supply Chain Management………………………………………………………………….5

3.0  Decision Making…………………………………………………………………………….7

4.0  E-Commerce………………………………………………………………………………...8

5.0  Recommendations…………………………………………………………………………...9

6.0  Conclusion…………………………………………………………………………………...10

7.0  Bibliography…………………………………………………………………………………12

Introduction

            BMW is an automobile, engine manufacturer and motorcycle company whose headquarters are situated in Germany. The company was founded in 1917, and through the years it has made several acquisitions. In 1994, the company acquired the Rover Group. The acquisition of Rolls-Royce then followed in 2003. This has helped in strengthening the organization’s market base. The market share seems to be increasing with recent ventures. The product that the paper aims at putting a stint focus on is the company’s cars. In 2010, the company produced 1,481,253 vehicles. There was an increase compared to the previous year where the production level stood at 1.3 million. In 2009, the Company had more than 23 assembly and production plants (Buckley, 2010). The plants are located in more than 13 countries.  

            BMW’s car production is favored by the market condition that exists in the industry. There is the aspect of product orientation and consumer orientation. BMW is more concerned with consumer orientation since they tend to produce what their consumers want. This includes the features and quality levels to be included in each motor vehicle. The company tends to concentrate on high income earners based on the quality and pricing of its vehicles. It strengths emanates from brand reputation, corporate social responsibility, skilled workforce and quality products among others. Opportunities for BMW cars are presenting themselves based on the fact that people are now developing positive attitudes on “green” vehicles. Changing consumer needs and an expanding brand portfolio also provide great opportunities to the organization (Domansky, 2012). The company’s supply chain management has contributed significantly to the success of the company’s vehicles. This has been supplemented by various decisions made in the organization.

Supply Chain Management

            BMW’s cars supply chain compromises of suppliers, production process, middle men (retailers and wholesalers) and consumers. The management of the supply chain has been effective hence contributing to the success of the organization. There are strict guidelines used when choosing the suppliers. It has been the tendency of the organization to work with highly recognized entities in various operations. These companies must have built a reputation for themselves during their years of operation (Cranswick, 2010). Using such an approach was arrived at based on the fact that successful companies usually provide more quality products to their consumers. The reputation of the suppliers can also be used to convince end users of the quality aspects of cars being manufactured. A good example of how BMW uses highly reputable suppliers is its involvement with Vodafone. The company has chosen Vodafone as its M2M supplier. BMW vehicles are fitted with special Vodafone SIM chips that link the company to its vehicles. This is aimed at providing consumers with innovative in-car services such as online services, 24/7 personal concierge service for drivers and emergency call function (Vuskane, 2011). BMW has also chosen Dana to supply the company with drive units. Dana supports the company with design and production of rear and front differentials.

            BMW manages its suppliers on various aspects. Among the common techniques is subjecting its suppliers to contracts of ensuring quality supplies. There is an agreement stipulated to each supplier based on the quality levels that the organization expects from them. Failure of meeting the set standards results to termination of the contract between the two companies. BMW cannot afford to entertain any form of laxity from the suppliers due to the competitive nature of the industry. Any shortcoming might result to a gain on the side of the competitors.

            Most of the cars are produced when the demand for them arises. The production process commences with suppliers delivering the relevant materials required for manufacturing. Some of the components are in-built. Production process is initiated in the press shop. Here, all the metals that are going to be used in the manufacturing process are pressed to desired shapes and sizes.  The design is usually dependent on the vehicle that the metals are going to be fixed. Machines are used in this so as to come up with standard units. After the raw materials have been converted to desired sizes and designs, they are then moved to the body shop. At this shop, the parts are coined together to form the outer shell of the vehicle. The car’s design is dependent on the material derived from the press shop (Lewin, 2009). The only function of this shop is to assemble the materials from the press shop. After the body has been affixed, the body shell is then moved to the paint shop. It is passed through computerized conveyors. At some points, the body shell stops and revolve on turntables for checkups. From the paint shop, the car then goes to the assembly point. At this point, all the relevant equipments are integrated in the car. The systems are placed according to the stipulation. The marriage process then follows where the car’s engine system is put in place and its effectiveness is tested. From this point, the car is ready for use.

            Completion of the production process is followed by the distribution prospect. The company has instituted a diverse distribution channel. Through its channels the company can sell directly to consumers. It can also sell to consumers through retailers or wholesalers. Having diverse distribution channels has enabled to reduce the bargaining power of distributors. If a single distributor is involved the bargaining power would be high hence making it difficult for the company to maximize on its profits (Maguire, 2006). Intermediaries such as retailers and wholesalers also help the company in various ways during the distribution process. They help in stimulating the marketing flow of the vehicles. The retailers have already invested in storage facilities. This helps the organization in the financing aspect as it does not have to incur this cost. Some retailers also offer some financial plans purchase agreements to the consumers. These plans enable them to buy the company’s products even when they do not have sufficient funds through some arrangements. Such an attribute helps BMW in increasing its vehicle sales levels and expand the market share. In the long-run user convenience is enhanced.

            The end customer is very important to BMW. This is because they are the ultimate reason for the productions taking place in the organization. They determine many aspects of the supply chain being used by the organization. BMW is more of consumer oriented. It goes with what consumers are demanding for in the market. This comes along with quality of the cars and equipments that they desire to be installed. On recent years, consumers that are conscious of the environment are being taken care of by the organization. The company is now producing hybrid cars that enhance environmental sustainability. This is going well with those consumers that term themselves as “green”. Failure to manufacture such vehicles would have resulted to loosing this group of consumers to the competitors. Using a consumer oriented approach is being viewed as a corporate social responsibility. The more concerned the company is towards its end users, the more its profits are likely to increase (Maguire, 2012).

Decision Making

            The decision making in BMW’s supply chain is made efficient due to working in partnership of the relevant stakeholders. Among the decisions that the company has had to make regarding the supply chain is the production process. The warehouses are becoming small based on the quantity of cars that the organization is required to manufacture. Increasing the number of warehouses will not be a good idea for the organization. This is because the company will incur more holding costs hence reducing the profits prospects. Based on this effect, the management has made a decision of using some aspects of Just In Time production. Here, the production initiates once order have been placed by the relevant stakeholders. The people placing the orders might be the end users, or the company’ distributors. This is a very effective approach since it reduces the cost of holding inventory.

            Another critical decision that has been made by the organization is targeting high income earners in the supply chain. The approach might be favorable but the organization is losing a lot in terms of market share based on this strategy. There are low income earners that cannot afford this cars butting are willing to be associated with the company. The company should put such consumers under consideration since they might help in boosting the profit aspects of the company (Kiley, 2004).   

            There has also been the decision of using a three-step process for risk management in the supply chain. The first process includes the sustainability risk filter. At this process all the risk aspects of the supply are eliminated. This is then followed by a self-assessment questionnaire. The questionnaire is used in assessing how effective the organization has been in its aspects of managing risk in the supply chain. It becomes possible to assess the shortcomings at this stage. Sustainability audit is then conducted as the third process. The audit is conducted by an independent body hence providing room for a critical review. 

E-Commerce

            BMW has not concentrated more on E-commerce based on the production of cars. This is because their supply chain has been more reliant on dealership with the distributors. B2C form of e-commerce has been affected more on this aspect compared to the B2B. When dealing with its suppliers more e-commerce activities have been experienced compared to when the organization is dealing with end consumers. However, this aspect seems to be ending since the organization aims at taking advantage of all the avenues that are available. The competitors are highly embracing this ideology hence prompting the company to be more rigorous than it was there before. Currently, BMW is using Intershop Software for its platform. This approach is believed to enhance consumer experience, management of multiple brands through a single platform and integration of available IT infrastructure (Heneric, Licht & Sofka, 2011). Most of the cars being involved with e-commerce are the hybrid cars. For efficiency, BMW has had to sign contracts with e-commerce specialists like iForce. The outsourcing aspect tends to increase the supply chain stakeholders.

            BMW also claims to be the first automobile company in UK to sell through eBAY. Through this platform, the company sells accessories and parts. This includes car care products, brake discs among others.  Previously these components would only have been acquired from the organization’s dealership (Shah, 2012).

 Recommendations

            BMW has several things that it would do to help improve its supply chain management. The aspect of the supply chain is to ensure that the organization has been able to derive the maximum profits that it can. One way that the company can improve is by changing its strategy on the end consumer. The company’s supply chain only targets the high income earners based on the nature of its cars. BMW should try and practice some aspect of market segmentation. Here, it will be able to offer its products to both the high end and low end consumers. The company will continue with its current operations, but develop another market segmentation of consumers that are not able to keep up with their current prices. They will develop cheaper products to these consumers. Marketing on this segmentation will not be a problem since the brand name is already recognized (Olson, 2012). Many low end consumers would like to have an opportunity of associating themselves with the company’s products but have never had the opportunity. This will help in improving the market share hence boosting sales.

            Another aspect that might improve BMW’s supply chain is introduction of limited edition cars in the production mix. These are those cars which are produced and sold at one period of time and are never presented on the market again. Using such an attribute would attract consumers that like the aspect of being unique (Plunkett, 2009). They would be willing to pay huge amounts of money so as to quench their desires. This would be an opportunity for the organization to increase its sales. It also helps in building consumers loyalty along the supply chain. This is because the distributors will also have the share of the loyalty hence promoting favorable business for the company.  

Conclusion

            BMW seems to be among the top three manufacturers of luxury cars in Europe. The success has emanated from the decisions that have been made all through. Supply chain management has contributed immensely to this realization. Favorable operations and decisions have been on how the suppliers are selected and the aspects of managing them. They are key contributors to the organization’s success hence they should be analyzed in the best way possible. The process of production from the company is quite clear and is standardized in all the manufacturing plants. Lack of complexities has contributed to the high quality of cars being manufactured. Having a diversified distribution channel has also helped in eliminating distributor’s bargaining power. This increases the profitability prospects of the organization. However, the company needs not to focus solely on the high end consumers. The low income consumers would also help in improving the supply chain if effective market segmentation is implemented. There will be an increase in make share hence increase the ability of immersing more profits.  

References

 Buckley, M., 2010. Bmw Cars. Los Angeles: MotorBooks International.

Cranswick, M., 2010. The BMW 5 series and X5 a history of production cars and tuner specials,    1972-2010. Jefferson, N.C.: McFarland.

Domansky, L. R., 2012. Automobile industry: current issues. New York: Novinka Books.

Heneric, O., Licht, G., & Sofka, W., 2011. Europe's automotive industry on the move        competitiveness in a changing world. Heidelberg: Physica-Verlag ;.

Kiley, D., 2004. Driven: inside BMW, the most admired car company in the world. Hoboken,        N.J.: John Wiley.

Lewin, T., 2009. The Complete Book of BMW: Every Model in the World Since 1962. Los Angeles: MotorBooks International.

Maguire, M., 2006. Competitive forces BMW - an analysis of the effects. München: GRIN Verlag.

Maguire, M., 2012. BMW Value Chain Analysis. München: GRIN Verlag.

Olson, D. L., 2012. Supply chain risk management tools for analysis. New York, N.Y.] (222 East             46th Street, New York, NY 10017): Business Expert Press.

Plunkett, J. W., 2009. Plunkett's transportation, supply chain & logistics industry almanac.            Houston, TX.: Plunkett Research.

Shah, J., 2012. Supply chain management: text and cases. Upper Saddle River, N.J.: Pearson        Education.

Vuskane, L., 2011. BMW Business Strategy - An Overview. München: GRIN Verlag.

Wells, P. E., 2011. The automotive industry in a era of eco-austerity creating an industry as if        the planet mattered. Cheltenham, UK: Edward Elgar.

                                   

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Perspectives of Performance Management

Developmental and Evaluative Performance Management Systems

            Performance management system is a process designed to involve all employees and other relevant stakeholders to improve organizational effectiveness. Both developmental and evaluative performance management systems have similar purposes. This is because they are derived at attaining a common goal. Among the chief purpose is enabling employees achieve superior standards to be used at the work place. The standards are attained by use of several tools in this realization. Both also serve the purpose of identifying skills and knowledge required for a certain job. These skills and knowledge would help in performing efficiently since it gives the drive in focusing towards performance in the right task and manner (Aguinis, 2013). Employee performance is also boosted by encouraging motivation, empowerment and implementation of favorable reward systems. At this point, the barriers of effective performance are identified, and real time solutions derived. Both strategies are designed to improve the communication system between supervisors and employees. This is by clarification of roles and accountabilities and communicating it to all the departments involved.

            However, the tools used are different in each strategy. Evaluative performance management systems use review forms as one of its tools. These review forms entail information of all employees and their respective positions in the organization. They have various standards that have been set and are used to assess the performance of these employees. The evaluative strategy also makes use of the recognition technique to fulfill its desired objective. Employees that have attained a particular set threshold are rewarded on different basis (Solomon, 2009). It works as a motivation to other employees to perform so as to get recognition next time. Developmental strategy on the other hand, uses training programs. Employees are trained based on the standards of the relevant organization. The training process helps them fit into the system and perform as it is expected of them. There is also the use of performance planning as a tool. All the relevant stakeholders brain storm and generate the best plan to help propel the organization to a higher level.

Strengths of the Systems

            Both systems have their own strengths. Strengths in the developmental system include the ability of the system integrating all employees into a common unit. This is through the training programs that are offered. The employees are equipped with similar abilities since they have undergone through the same training program. As a result, it becomes easy to work in partnership hence achieve success along the way. Performance planning on its part brings essence of the job description.  Through the planning process, all employees are aware of what is expected of them, hence work towards delivering (Aguinis, 2013). It also helps in laying down the output goals. This is achieved by maximization of economic resources.

            Evaluative system on its part ensures that employee performance is analyzed through the performance review forms. This comes as strength since it gives the supervisors an idea of how to deal with the employees. It also helps in identifying whether employees still have the qualities and abilities that earned them jobs in the first place. It helps in assessing whether there is a need for any replacements in certain areas of the organization. Recognition on it part brings motivation to all employees. To them it acts as a morale booster.

Weaknesses of the Systems

            Both systems have their weaknesses, which are not very domineering. In developmental systems, the training programs might not favor everyone at the workplace. Most of these programs are aimed at bringing uniformity. For this reason, similar techniques are used on every employee. This might not be effective since it does not consider the aspect of diversity which is prevalent in every organization. Performance might also bring rigidity on the side of employee and deter them from adjusting to changes in the future (Baron, 2011).

            In evaluative system, the recognition process might be bias. This might depend on how a certain employee is perceived by the management. It would work as a discouragement to other employees and fail to deliver the intended objective.

Benchmark of Critique

            Acceptability can be used as a benchmark, to critique performance management systems. The tools used in every system should be used to all employees in the organization. Some management bodies tend to impose systems that do not go well with the employees. They use their influence to force employees to go through the systems despite their attitudes towards these systems. Employees might not accept some rationales based on their beliefs, motivation drives and abilities. Some might think that they are not fair and suitable for the desired objectives. As a result, there will be reluctance in embracing these systems. Using the systems might not be effective in improving the performance in the workplace. This is because the employees will be opposed to many changes in the organization due to the fear of the unknown (Solomon, 2009).  The aspect might paralyze most activities and delay developmental programs as a whole. Employees are an integral part of any organization. Their needs and concerns must be given paramount consideration before operations are executed. Any performance management system that is not embraced by employees should be reviewed. Spearheading operations with a performance management system that is not acceptable might lead to total failure.

Good Practice of Performance Management

            Several practices can be used in enhancing performance management in any organization. Among the practices is embracing diversity in the organization. Diversity is an aspect that surfaces in many organizations with this error of operation. It comes in many forms ranging from age, race, abilities and beliefs among others. It is upon the organization to devise a plan of managing diversity. This will help in accommodating all the employees in the system irrespective of their differences (Solomon, 2009). It would even be easier to understand how certain individuals behave in certain ways.  This way, the strategies devised in improving performance would be effective due to their inclusive nature. When the organization is establishing systems performance management, all the differences among the employees would be considered. At the end, the system chosen will tend to favor all employees irrespective of diversity at the workplace. This would help in evading the stumble of system acceptability by employees. Everyone would be willing embrace it.

            Working in partnership is another practice that needs to be embraced in performance management. All m employees irrespective of their status in the organization need to work together. Junior employees should be involved in some decision making processes involving organizational affairs. This helps in creating a sense of belonging. There is no segregation between the senior and junior staff. A good understanding everyone’s ability and weaknesses is attained. As a result, junior employees would be willing to embrace performance management systems being used in the organization since they were part of the body that coined them. This aspect helps in improving the general performance in the workplace.

Comparison of the Systems

            Developmental and evaluative performance management systems have some elements in common. Among the similarities is that both are focused on employees. These systems aim at improving the general performances of all the employees in the organization. Aim at directing employees towards achieving desired standards in the organization. This is because both systems encourage motivation and empowerment of employees. These are key components for success to be realized in any working environment. Another similarity is that in both systems, there is an implication that employees cannot achieve better performances by themselves. There are supervisors in both cases. For developmental system, the supervisors are the key designers of the actual plans to be followed. They are also involved in deciding what elements need to be included in the training programs. Employees have to abide with whatever that is brought forward. A similar case is observed with the evaluative system. Employees are not given the chance of evaluating each other based on their own observations. There is also no pre-requisite for them to point out on individuals that they think deserve recognition in a particular period of operation (Aguinis, 2013). All these are done by the management and relevant supervisors.

Contrast

            The major contrast is that the evaluative system is aimed at assessing the current performance of employees while developmental tries to focus more on future.  Evaluative systems just check the suitability of employees based current prevailing conditions. This means that it does not take into account the conditions that might have resulted to certain levels of performance. Developmental systems on the other hand concentrate with the future operations based on the tools used. Initiating plans and training programs are aimed at improving employee performance in future endeavors (Baron, 2011).

Summary

            Performance management systems are brought forward to enhance the performance of all stakeholders in the organization. Among the major systems used in most organizations are evaluative and developmental systems of performance management. These systems serve similar purposes once they are integrated in the organization. They both aim at helping employees attain higher standards in execution of their duties. However, the tools used for these systems are different. The evaluative systems make use of performance review forms and recognition. Developmental system on the other hand, makes use of training programs and performance plans. The strength of the training programs and performance plans is that they enable employees to work as a unit due to the interactions. However, the performance plans might bring rigidity since the employees’ mind set is already fixed. Performance review forms on their part can give supervisors ideas on the changes that their employees need to embrace for effectiveness. It checks on laxity that might have crept along the way.

            Acceptability can be used as a benchmark for critiquing a performance management system. This is because employees’ corporation is vital for a performance management system to work effectively. Managers need to embrace diversity and adopt strategies that would in managing it. This would help in understanding what employees want based on their status hence develop a system that will be accepted by all. Working in partnership would also play a significant role in convincing employees to accept various performance management systems.

References

Aguinis, H. (2013). Performance management (3rd ed.). Boston: Pearson.

 Baron, A. (2011). Taking Steps to Enhence Organizational and Individual Effectiveness.             Overview of Performance Management, 12(5), 23.

Solomon, C. (2009). Select a performance management system. Alexandria, Va.: ASTD Press.

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Vodafone Group

Introduction

            Vodafone is a multinational telecommunication company based in UK. The headquarters of the company are in London and a registered office in Newbury. Based on the number of subscribers, it is the second largest in the industry all over the world. According to a report released in 2011, it is only second to China Mobile in terms of revenue. In 2011, the company had over 438 million subscribers. The organization operates its own networks in more than 30 countries. In addition, it has partner networks in over 40 countries. Partner networks arise as a result of having a substantial share ownership in the networks. There is also the ownership of 45% of Verizon Wireless (Giudice & Kuenzel, 2012). This is considered to be the largest telecommunication organization in the mobile sector based in USA going by the number of subscribers. Vodafone offers both services and products in its mix. Among the products there are chargers, memory cards, headsets and flex arm cradle. These products are usually of high quality compared to a variety out there. Services include data offerings, messaging and voice services among others. Hi-tech systems have been devised to enhance that the services are not hindered during the delivery process. Any form of laxity is considered to be harmful to the organization in one way or another. Vodafone has been listed on the London Stock Exchange. Over the years it has been a constituent of FTSE 100 index. In mid 2012, it had a market capitalization of about 89.1 billion pounds (Giudice & Kuenzel, 2012). This was considered to be the third largest for all the companies that are registered in this stock exchange.

Vodafone and the Telecommunication Industry

            Most of the organizations in the telecommunication industry are similar in a variety of ways. This is based on the goals that they aim at achieving and the strategies that they use towards achieving these objectives. The ultimate purpose of these organizations is providing services and products to the consumers and generating profits from these ventures. It is the goal of every company in the telecommunication industry to immerse as much profits as possible. However, there are differences when it comes to the mission and vision of the organizations. A good example that can be used as a comparison with Vodafone is British Telecom. Vodafone’s vision aims at enriching consumer lives by offering unique mobile communication (Plunkett, 2008). British Telecom vision on the other hand, aims at being a global brand in system integration by providing consumers with cutting edge technology to guarantee satisfaction. Vodafone’s mission is to be the leading figure in the telecommunication industry in the highly connected world. British Telecom mission on its part aims at client engagement while working towards realizing profitable ventures.

            Vodafone has several strategic objectives that it desires to accomplish. The company is targeting to increase its market share by 20-25%. This will be supplemented by massive promotional activities in areas of operation and venturing in new markets. Another strategic objective of the organization is the total cost associated with network ownership. Once the costs have been reduced, the extra funds can be used in other areas. It would also help the company in lowering its prices so as to attract more consumers. British Telecom’s strategic objective is that of enhancing a consumer focused approach. This will be enabled by the organization’s mission statement that aims at consumer engagement.

            Vodafone’s stakeholders include the government, consumers, suppliers, shareholders and employees. The stakeholders influence the organizations goals and mission. Employees are viewed as a pivotal asset to the company. There are more than 85,000 employees and the company’s success is dependent on them. They are critical in ensuring that the mission statement of the organization has been attained (Ibbott, 2009). Shareholders on the other hand help the organization in attaining its strategic objective of increasing the market share. They do so by providing funds necessary for the expansion of existing networks. The company meets their expectation by enhancing that a profitable business model has been adopted. Shareholders benefit from the profits realized hence the organization must work hard to see this through. Consumer expectations are met by providing quality services and products. This is paramount for consumer satisfaction in any market. For the government, the organization ensures that it adheres to all the regulations and laws brought forward. It also makes its duty to pay all taxes as they fall due.

Vodafone Operations in the UK

            United Kingdom’s economy is the sixth largest all over the world in terms of GDP. It comes in at position eight based on purchasing power parity. The economy has been improving all through the years based on the output levels. UK’s economy is free and open based on how the systems tend to operate. Being a free market it entertains international corporations in the country without having much control on them (Card, 2008). Such organizations are subject to paying customs duty, import tax and other relevant levies. The economic freedom of United Kingdom has a score of 74.8. In 2013, this is the 14^th freest economy based on the score. The score has gone o.7 points higher compared to last year (Giudice & Kuenzel, 2012). This is great indication of how government spending is being controlled. Such an economy has several impacts on Vodafone. One is that it makes the telecommunication industry open to new entrants and other international corporations. The essence increases the players in the industry hence creating the need to scramble over consumers. As the competition intensifies, Vodafone needs to develop strategies that would help in gaining competitive advantage. Such strategies do not come just like that. There is a lot of time and resources spent on research and testing the effectiveness. The implementation process also consumes substantial resources. This increases the company’s cost hence lowering the profits. Vodafone might also lose part of its market share to the new entrants.

            United Kingdom government manages the economy through the use of fiscal and monetary policies. The policies are deployed once the automatic forces fail to restore the economy in the necessary equilibrium. This includes the times of inflation and unemployment. When the government is faced is by a budget deficit, it has two options in financing it. It can either sell bonds to the public of print money. The aspect of printing money is a monetary policy because it increases the supply of money in the economy. Increase in money supply affects Vodafone in a positive way. When there is an increase in money supply, consumers have more money on their disposal. This means that their consumption levels will go up. Consumers associated with Vodafone will tend to acquire more of their products and services. The sales revenue increases hence the profitability aspects follow in suit. On borrowing from the public by selling bonds in the open market operations, the government would be using a fiscal policy. The government through the central bank sells the bonds in order to expand its money supply. These bonds come with a relatively low price so as to entice the public based on the profits that they will make once the interest rates change (Giudice & Kuenzel, 2012). This tends to reduce the amount of money on consumers’ hands hence reducing their consumption levels. It would affect Vodafone in that the consumers reduce the consumption level of their products and services hence reducing the sales levels. In the long-run, it affects the profitability aspects.  

            In UK, the regulatory mechanism is defined by the rule of law. It is transparent and efficient hence favoring businesses. There is no minimum capital requirement and only takes 13 days for a business to be established. The legal system is independent hence ensures that contracts and property rights are safeguarded. This is important to Vodafone since it is on organization working in partnership with several stakeholders. The regulatory mechanism ensures that all the parties meet their contractual obligations without any failure. It also makes it difficult for other people and organizations to infringe the company’s property rights. Competition policy on the other hand works to reduce anti-competitive activities in all industries. The essence of competition is aimed at ensuring that all organizations provide consumers with quality services and products.

Market Structure

            The United Kingdom telecommunication market structure is a perfect competition. This aspect influences the production decision and pricing of Vodafone. The company has opted not to choose price since it is not a favorable approach. Competitors would use it to bring the organization down and acquire its market share. Vodafone chooses output quantity as their pricing strategy in the market. Here, the organization produces more and ensures that all the units are sold. This increases revenue hence the profitability levels. It has been the best approach to the company since cost leadership is not viable based on many uncertainties brought b y the market structure.  On production decisions, the organization has opted to go with product differentiation. This helps the consumers in indentifying their products and services once in the market (Horn & Faulkner, 2011). This is very important since other players in the industry are providing similar offerings.

            The market forces in the telecommunication industry include internal rivalry, bargaining power of consumers, availability of substitutes, supplier bargaining power and threat of new entrants. The notion of consumers having the bargaining power prompts the organization to be very keen on its pricing attributes. This is because they are very responsive to price changes. Taking the prices too high might lead the consumers to shifting their preference towards the competitors. Presence of close substitutes on the other hand, has made Vodafone to differentiate its products from those of the competitors. Failure to do this would lead to lose of sales. Threat of new entrants has enabled the organization in developing strategies that would help in attaining long-run sustainability. Among them has been establishing consumer loyalty. Once there is consumer loyalty, it becomes difficult for new entrants to porch consumers.  Rivalry in the industry is caused by the intense competition. This has made the organization to devise more strategies in trying to bit competition. Watching every move of the competitor has been very important (Horn & Faulkner, 2011). Supplier bargaining power on its part ensures that the company pays the suppliers favorably and on time. They are the same ones that serve the competitors and treating inappropriately might ruin operations.    

            Vodafone’s business environment is more of political, technological, demographic and social environment. The technological environment is changing very fast based on the nature of the industry. This makes the organization to be very flexible so as to adapt the new rends. Political environment is concerned with the policies and regulations being coined. Some of them favor the organization while others do not. Demographic environment seems favorable since majority of the people are conversant with the telecommunication industry hence utilize its products. Cultural environment that shapes the business is diversity. Vodafone has the ability of operating in many countries and remaining sustainable at the same time. The management has also made it possible to deal with diversity at the workplace. Working in partnership has contributed significantly to the success of the organization.

Impact of International Business on Vodafone

            The effect of international business on Vodafone is double folded. This is because it has brought both benefits and limitations to the organization. The benefits arise from the fact that the organization has the ability of operating in other markets apart from UK. This helps in diversification aspects since when one market fails the other works to sustain the company. It also helps in increasing the market share due to the new ventures being opened (Galgoczi, Leschke & Watt, 2009). As the market share increases profits are also likely to increase. The disadvantage comes in when international telecommunication businesses try to venture into the UK market. They tend to create some form of competition and porch into the market share that is already available. In the long-run, Vodafone has to spend a lot in trying to create competitive advantage.

            Some global factors also work to the advantage of the UK businesses. Among these factors is the establishment of trading blocs like EU and NAFTA. These blocs have affected the cost of operation in markets that companies like Vodafone operate in outside UK.  Tariffs being charged have dropped substantially due to availability of these blocs. As a result, profit maximization is being realized in international markets.

            The role of EU is enhancing that a favorable business environment is established in all member states. To create effectiveness the EU has come with various policies that have impacted UK businesses in various ways. Among them is the environmental policy. This policy stipulates that every organization operating within the member states of EU must aim at reducing its pollution levels significantly. The policy came about after it was noted that pollution levels keep on rising as each year passes by (Galgoczi, Leschke & Watt, 2009). This would have an effect since most of its electronic devices are presumed to contain elements of unwanted resource in the environment. This may deter people from consuming the company’s product. This would mostly affect those consumers that refer to themselves as being “green”. They usually work towards ensuring that the environment is taken care of all the times. Such consumers force companies to start producing environment friendly products something which cannot be changed overnight.

 References

   Card, D. E. (2008). Seeking a premier economy the economic effects of British economic             reforms, 1980-2000. Chicago: University of Chicago Press.

Galgoczi, B., Leschke, J., & Watt, A. (2009). EU labour migration since enlargement trends,        impacts and policies. Farnham, England: Ashgate.

Giudice, G., & Kuenzel, R. (2012). UK Economy: The Crisis in Perspective. London: Routledge.

Horn, S., & Faulkner, D. (2011). Understanding global strategy. Andover: Cengage Learning.

Ibbott, C. J. (2009). Global networks the Vodafone-Ericsson journey to globalization and the         inception of a requisite organization. Basingstoke, Hampshire: Palgrave Macmillan.

Plunkett, J. W. (2008). Plunkett's telecommunications industry almanac. Houston, Tex.: Plunkett Research.

         

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H&M Marketing Strategies

Market Orientation

            The company’s market is highly orientated. This is based on several factors that can be derived from the case study. Among the issues that can be used to make this conclusion is the decision making perspective, culturally based behavioral perspective and strategic perspective. H&M is more concerned with its consumers as opposed to the products being delivered. Consumer orientation is more vivid all through. This is based on how the needs and wants of consumers are expressed and met by the organization. An example in the case can be based on the extent that the organization is willing to go so as to meet the needs of the consumers. They have embraced the notion that design is a dynamic trend that must be looked into time and again.

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The company has gone ahead to employ designers from Netherlands, Britain, USA, South Africa and Sweden. This is an indication that they want to broaden the scope and bring as much as possible. The average age of the designers is 30 years. At this age, they are more conversant with new trends based on the people that they interact with. Their sources of design are also an indication of how devoted they are to their consumers. Many companies in this industry use fashion shows as their major outsource for designs (Paul & Kapoor, 2008). H&M has gone beyond this in order to determine exactly what consumers want in their marketing strategy. They get most of their designs from the streets based on what people are wearing at that moment. They tend to introduce a design from one region to another. There are also observations of what other companies are producing. H&M picks the designs and tries to modify them in a way that will attract more clients to their business.

            Another aspect that can be used to support this view from the case is the level of competitor orientation. The company has established the need to create a competitive advantage as a key component in its business operation. To keep with intense competition, the company is using the pricing strategy as its tool. In this industry is believed that combining fashion and price does not work as a favorable business model. Companies like Benetton tried this model and failed. However, the model is working for H&M due to various reasons. They try and acquire cheap materials possible to be used in the production process. Despite the materials being cheap, they have the ability of bringing the desired designs. Moreover, when fashion and design involved tastes and preferences change all the time. The company is aware of this and knows that their clothes will consumer for the desired time before they are worn out. Along with buying cheaply, the company ensures that it keeps its overheads exceptionally low. This way they are able to attract more consumers. The more the consumers, the higher the sales revenues (Fricke, 2007). A good example in the case is whereby most consumers are not willing to spend 600 pounds corduroy trench coat. H&M makes a coat of similar design and is willing to take it to the market for 32 pounds. By offering this price, there is a profit made.

            Responsiveness is another aspect that can be used to show the extent of market orientation in the company. After observation, the company noted that the industry is highly segmented. The level of segmentation that was more vivid arouse from economic differences. H&M seems to target more of the younger generation. Companies like GAP have been affected due to lack of embracing this ideology. Most of the young generations are in school. Providing them with affordable products will enhance their loyalty at all times (Fricke, 2007). A good example is Sabrina Farhi 22, who claims that everything offered by the company is nice and cheap. It becomes easy to lock such a customer on the company’s radar.

Market Segmentation

            The company’s market is highly segmented. Its segmentation is based more on profiler, as opposed to consumer needs. Under the profiler aspect, the bases of segmentation used are demographic, psychographic and behavioral. Under the demographic basis, sex, age and family have been the target definitions. When it comes to sex, the market is divided into male and female. Based on the observations made by the company, men are viewed to be less fashion-conscious compared to women. This aspect is more dominant in the American market. This means that clothes targeted for women consumption must be up to date with the current fashion trends. Failure to implement this would lead to loss of a substantial market niche. For men, there is no need of being more concern about the fashion trends. Being efficient in production and resource allocation would be favorable for the organization. This is because men are only after clothes that are decent and worry less on the fashion attributes. Family on its part has led the company to producing casual basic outfits. This makes it more appealing for family shopping. It can create a wider market since when one individual is shopping; he or she will include clothes for other members of the family (McDonald, 2012). As a result, the clothes involved for this segment must be appealing to all family members.

            Psychographic basis on the other hand, is more concerned with lifestyle and personality aspects. Some people want to get involved with some clothing trends due to their attachment with a certain social class. H&M has been able to bring this to their consumers at a relatively cheaper price compared to what other companies are offering out there. It becomes difficult to identify the true worth of these clothes because the designs are similar and it is only the material that differs. Behavioral aspects on the other hand, are concerned with brand loyalty. The main target group here is the younger generation. This focuses more on the individuals in school. Producing cheaper and fashion trending clothes will attract a huge market share from this group. This is because money is limited resource to them but at the same time they want to be at par with the current fashion.

Benefits of Segmentation

            Market segmentation enhances competitiveness in an organization.  This is because segmentation comes along with increased focus on a certain group in the market. There is a creation of a better understanding of what this unique segment requires. Better understanding of consumers results to delivering of effective value positioning. In the long-run, it entices customers to the relevant brand. This only happens when the company is aware of whom they are trying to reach (McDonalds, 2012).

            Segmentation also enables an organization to select the most appropriate media for advertising. Most of the people in a given segment have similar tastes and preference on most areas. This means that it would be easy to reach them within a short period. Funds involved here will be minimal since it s not a trial and error basis. The most suitable media is established based on the behavioral attributes.

            Customer retention is also enhanced through segmentation.  This is enhanced through the life cycle of a customer. Once people are pleased with a good or service, they tend to plan for it even before the actual time of purchasing arrives. This is due to loyalty that has been established (Weinstein, 2004). Segmentation helps in creating consumer loyalty since it helps in the engagement process. A fruitful engagement process ensures that social responsibility is enhanced. Social responsibility is a primary ingredient for a company trying to create consumer loyalty.

Segmentation also comes with increased profits. Profits arise since segmentation increases the level of competition. Being able to deal with competition is a stepping stone towards attaining higher revenues in an organization.

Risks of Market Segmentation

            Among the risks is that segmentation is quite expensive for small companies. A primary research needs to be conducted so as to identify individuals that buy their products. This becomes even more challenging when an organization is operating multiple markets. The process is also relatively time consuming. A lot of time is spent in the identification process since the organization must enhance some operations so as to get a clear cut. Customer profiles including their demographics must be drawn before a conclusion is made (Weinstein, 2004).

            Enhancing segmentation may also tend to overlook other customers. A significant number might fall outside the bracket that intends to be targeted based on the approved criteria. This means that the organization will miss on the revenues that would have been generated by these consumers. It gives competitors an opportunity to attract the neglected consumers and form a strong market base. Generating a large market share enhance the competitiveness of an organization. This might work to the disadvantage of the company that is practicing segmentation.

 Limited Edition Clothing

            Introduction of the limited edition clothing comes with a lot of marketing benefits to H&M. Among the benefits that accrue is consumer connection. Most people enjoy standing out from others around their vicinity. Wearing clothes that other people do not have helps in fulfilling their quest. This means that if there is any limited edition offering on the market, they will out-rightly jump to it. As a result, a favorable connection is created between the company and consumers (Lamb, Hair & McDaniel, 2012). There is a form of social responsibility being provided to this group of consumers. They tend to remain loyal to the organization’s products so as to reap similar benefits later.

            Designing of the limited edition clothing also acts as a form of sales promotion to the organization. Being limited edition clothing, once it is gone from the market it will not be seen again.  This creates the urge for every consumer out there to anticipate for the product. The hype is extreme such that everyone is aware that this clothing range is gracing the market soon. News spreads faster through the word of mouth. Others get hyped due to the publicity being created by their friends and colleagues (Okonkwo, 2007). Once the products are introduced in the market, long queues are usually experienced. Some people tend to miss out on the offering. Once the sales are completed, the company will realize the amount of savings it has made on publicity. Not much is spent on advertising since an organization’s consumers help in carrying the message to their friends and colleagues that they think might be interested. This results in bringing in targeted consumers hence broadening the profit margins.

            H&M would also benefit from multiple purchases. These clothes are limited edition and only grace the market once. There are those people that want to the clothes for some time. As a result, they opt for multiple purchases. This is a preference by consumers to have their buffer stock in the future (Lamb, Hair & McDaniels, 2012). The clothes will even be more appealing at a future date since they have already gone out of the market. Multiple purchases enhance that products move fast.

            In marketing limited editions also come along with brand associations. In the clothing industry, many consumers want to associate themselves with various designers. Some people will buy certain products since they are associated with certain individuals. This effect might work effectively for H&M. It will be way of locking their consumers. A certain level of loyalty has already being established through this approach. As long as the designers are operating within the organization, these consumers will always associate with their brands. In the long-run consumer loyalty is created and the consumers become affiliated to the company itself.

            Limited editions can also be used by an organization as a component of market testing. Once the clothing is launched into the market, relevant variables are put into consideration. These variables include the nature of people embracing the product and their general feeling. Based on the product’s performance, the company might decide to include the clothing into its life line product range. Once a product is identified through this process, it is bound to bring immense success to the organization. This is because the company is not doing any form of trial and error (Okonkwo, 2007). There are statistics that show this supremacy. All the shortcomings from the product are gathered through this process. The direct interaction of consumers and the stores involved in distribution make this attainable. This information will be used in making the brand superior in the future.

            Offering limited edition clothing also helps in reducing total overhead cost. It is apparent that most organizations spend a lot on the holding costs. For limited edition clothing, the holding cost involved is minimal. The clothes do not take a long time once in the stores. Some even get exhausted within some few minutes. All costs associated with holding these products are reduced substantially.

Marketing Challenges

            In the future, H&M is likely to face a number of marketing challenges. Challenges of effective marketing continue to increase in the clothing industry worldwide. This has been attributed by inflationary tendencies, resource constraints, technological changes and changing lifestyles among others. The clothing industry is characterized by intense competition and dynamic environment. As a result, it becomes difficult for organizations to maintain long-term success (Sinkovics & Ghauri, 2009).

            Among the challenges that are likely to be experienced is competition. H&M is enjoying a favorable market share based on its business model. Market entry into the clothing industry is always open. If H&M continues to make these amounts of profits, then things might change in the industry. Some of the key players might opt to change their business strategies and embrace the strategies being used by H&M. New entrants into the market might also come in using a similar strategy. This will mean that the competitive advantage being enjoyed by the company will be neutralized. As a result, H&M will face an uphill task to cope with this level of competition.  Through scrutiny to the existing business model will be of paramount importance. New ideas and strategies must be implemented during this period so as to propel the company towards success in the light of this competition.

            Another marketing challenge is that long-term pricing will be difficult to project. This is because the uncertainty in the economy has made many buyers and sellers exceedingly cautious hence making business conditions difficult. Volatility of energy resources and raw materials will make future price projections difficult (Doole & Lowe, 2008). The aspect might affect H&M marketing aspects in many ways. Having inappropriate projections might come with numerous failures of operations. Once the operations are not initiated in the best way possible, a lot of questions arise from the side of consumers. Occurrence of such an event might result to losing a whopping market share.

            Not having enough time to support the sales might also fall under the marketing challenges that the organization will face. H&M is at the point where that the organization has already grown. It is already known to many consumers and enjoys a substantial market share. Based on this, the company might turn its focus to development. This is aimed at propelling the organization to a higher level. Most businesses usually undergo through this period. No one wants static once an opportunity has unfolded. As a result of focusing on development, minimal time is spent to support sales (Doole & Lowe, 2008). If the issue is not properly addressed, severe consequences might follow. The main challenge for the organization will be balancing time spent on development and support of sales.

            Keeping up with the marketing strategies and trends will also offer food for thought to the organization. Marketing usually undergoes through many transformations. What might be working very well today might not be effective in some years to come. This means that H&M needs to have efficient people within its marketing circle. They must be open minded to help accommodate any changes in the marketing trends. Adequate investment for marketing training programs must be made too. Failure of taking this caution might lead to problems once the challenge arises.

            A change in consumer tastes and preferences is another marketing challenge likely to be faced. Consumers in most industries are very unpredictable. What might be attracting them today might not have any appeal tomorrow. This usually affects businesses before they come to realize. They continue operating on a similar business model for a long time. For H&M to overcome this, periodic research should be conducted on the products being offered by the company. It will help in determining whether the products are still appealing to consumers. This way, effective measures can be taken to help come in terms with what the current market desires. Being rigid might be detrimental to the organization (Sinkovics & Ghauri, 2008).

 References

Doole, I., & Lowe, R. (2008). Strategic marketing decisions in global markets. London:    Thomson Learning.

Fricke, S. (2007). Market orientation: The construct, research propositions, and managerial            implications. München: GRIN Verlag GmbH.

Lamb, C. W., Hair, J. F., & McDaniel, C. D. (2012). Essentials of marketing (7th ed.). Mason,      Ohio: South-Western Cengage Learning.

McDonald, M. (2012). Market Segmentation How to Do it and How to Profit from it.. New         York: Wiley.

Okonkwo, U. (2007). Luxury fashion branding trends, tactics, techniques. Basingstoke: Palgrave             Macmillan.

Paul, J., & Kapoor, R. (2008). International marketing: text and cases. New Delhi: Tata     McGraw-Hill.

Sinkovics, R. R., & Ghauri, P. N. (2009). New challenges to international marketing. Bingley:      Emerald Jai.

Weinstein, A. (2004). Handbook of market segmentation: strategic targeting for business and       technology firms (3rd ed.). New York: Haworth Press.

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